Sunday, October 25, 2009

The Southwest Viewpoint

Bill Owen is Southwest Route Planning Exec, and he said on the company blog (responding to several comments disappointed that Pensacola was not selected, and the relative weakness of the PFN market):

Good Thursday afternoon, everyone!

Thanks for all of the good wishes and support. And to those of you out there that are expressing disappointment that our new city announcement was not Pensacola, guys, please understand this was never a competition between the two. This was not an "either/or" decision. We know enough to understand that the two are distinct, different markets, and we remain interested in Pensacola. However, the combination of a new airport and the alliance with St. Joe led us to believe that it was time in May of 2010 to "do" Panama City.

Hope that explanation eases the disappointment! Keep those comments coming, and thanks!

BillBill Owen — Thu, 10/22/2009 - 15:25

Taking the airline viewpoint a little further, here's another way to look at it: SW had a profit of $178 M, a margin of 1.6% on $11 Billion revenue in 2008 INCLUDING $329 Million gained on fuel hedging. So, to earn $14 Million that St Joe sends in a wire transfer quarterly, SW would have to sell $875 Million in tickets over their system and continue to gain significantly on hedges. This way they get the $14M on $20 to $30M in sales during a couple of difficult years overall. Not a bad deal. Delta used to sell an aging airplane or a delivery slot to stay profitable in a bad quarter (the good old days when Delta owned a lot of airplanes). The $8 or $10 M gain was like selling $500 Million more tickets at 2% margin, and for many years extended a run of profitable quarters.